Bonus quote of the Day: Mises on “the fateful efforts of the mathematical treatment of economic problems”

The mathematical economist attempts to ignore the difference between physical phenomena, on the one hand, the emergence and consummation of which man is unable to see the operation of any final causes — and which can be studied scientifically only because there prevails a perceptible regularity in their concatenation and succession — and praxeological phenomena, on the other hand [i.e, the phenomena of human action], that lack such a regularity but are conceivable to the human mind as the outcomes of purposeful aiming at definite ends chosen… Mathematical equations … are appropriate and useful where there are constant quantitative relations among unmotivated variables; they are inappropriate in the field of conscious behaviour. The equations of physics describe a process through time, while those of economics do not describe a process at all, but merely the final equilibrium point, a hypothetical situation that is outside of time and will never be reached in reality. Furthermore, they cannot say anything about the path by which the economy moves in the direction of the final equilibrium position. As there are no constant relations between any of the elements which the science of action studies, there is no measurement possible, and all numerical data available have merely a historical character; they belong to economic history and not to economics as such. The positivist slogan, "science is measurement," in no way refers to the sciences of human action; the claims of "econometrics" are vain.

1 comment:

On the one hand, I certainly agree that mathematics is not the be-all, end-all of science. I go further than Mises here as I hold that mathematics is only ever a tool science uses. There is a cult among physicists and chemists that holds mathematics as a sacred incantation that magically makes something scientific, and that's so obviously irrational that I'm astounded these "scientists" have any credibility.

On the other hand, economics is an application of psychology, and while psychology is an incredibly young science it is something that appears to be amenable to scientific investigation. The extreme variability inherent in psychology limits the precision we can obtain, but knowing the principles governing psychology cannot help but improve our understanding of economics.

There is also something to be said in favor of theoretical models that are impossible to reach. Hardy-Weinburg Equilibrium is such a case: no population is at such equilibrium, but how they deviate from it provides very useful information and the concept provides at least a coherent framework for examining certain questions. I can see econometrics holding a similar position. I certainly agree, however, that those who confuse theoretical abstractions with actual reality are fundamentally irrational, whether in evolutionary biology, climatology, astronomy, or economics!

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